EBITDA margin

Description

EBITDA margin ratio is considered as one of the most popular profitability ratios, because it excludes depreciation and amortization. In order to calculate EBITDA data must be collected from the income statement and cash flow statement. This ratio does not calculate the company's capital, non-cash expenses and tax incomes. Therefore it rather clearly indicates company’s operating profitability.

Norms and limitations

The higher the EBITDA margin value, the less operating expenses and the bigger company’s earnings are.

An increasing EBITDA ratio indicates better performance of the company. A higher value would indicate that the company is able to keep its’ income at a sufficient level.